WEBVTT 00:00:00.000 --> 00:00:02.220 I mean, imagine looking out your window during 00:00:02.220 --> 00:00:05.099 basically the absolute worst starvation crisis 00:00:05.099 --> 00:00:07.519 in American history and you're watching the federal 00:00:07.519 --> 00:00:10.859 government pay farmers to just slaughter six 00:00:10.859 --> 00:00:15.099 million pigs and let the meat literally rot in 00:00:15.099 --> 00:00:17.640 the sun. Yeah, it sounds completely absurd. Right. 00:00:17.739 --> 00:00:20.539 Or watching them actively plow under 10 million 00:00:20.539 --> 00:00:22.899 acres of perfectly good growing cotton while 00:00:22.899 --> 00:00:25.199 people are walking around in actual rags. I mean, 00:00:25.199 --> 00:00:27.500 it sounds like absolute madness, like a cartoon 00:00:27.500 --> 00:00:29.399 villain's plot or something. It really does. 00:00:29.960 --> 00:00:34.539 But in 1933, it was a desperate calculated mathematical 00:00:34.539 --> 00:00:37.560 equation, right, designed to basically save the 00:00:37.560 --> 00:00:39.859 United States from total collapse. So welcome 00:00:39.859 --> 00:00:42.219 to our deep dive. Today we are looking at a massive 00:00:42.219 --> 00:00:45.179 encyclopedic breakdown of Franklin Delano Roosevelt's 00:00:45.179 --> 00:00:48.759 New Deal. Yes, specifically spanning from 1933 00:00:48.759 --> 00:00:52.609 to 1938. Exactly. And our mission for this deep 00:00:52.609 --> 00:00:55.770 dive is to really cut through the heavy historical 00:00:55.770 --> 00:00:57.729 jargon. We want to understand exactly how these 00:00:57.729 --> 00:01:00.070 policies function under the hood, you know, how 00:01:00.070 --> 00:01:02.310 they permanently altered the very DNA of the 00:01:02.310 --> 00:01:05.709 American government. And we're going to explore 00:01:05.709 --> 00:01:07.870 that fiercely debated question of whether they 00:01:07.870 --> 00:01:11.370 actually worked at all. And, you know, to really 00:01:11.370 --> 00:01:13.090 understand the mechanics of what the government 00:01:13.090 --> 00:01:16.209 was trying to do, we have to grasp the sheer 00:01:16.209 --> 00:01:19.310 paralyzing terror of the moment. Right. Because 00:01:19.310 --> 00:01:21.629 before any physical rebuilding of the country's 00:01:21.629 --> 00:01:23.780 infrastructure could even be discussed. I mean, 00:01:23.840 --> 00:01:26.500 the government had to conquer a nationwide psychological 00:01:26.500 --> 00:01:30.200 panic. It was an atmosphere of complete and utter 00:01:30.200 --> 00:01:33.019 dread. Yeah. I want you, the listener, to really 00:01:33.019 --> 00:01:35.120 put yourself in that headspace right now. Imagine 00:01:35.120 --> 00:01:38.040 waking up in early March 1933. You look at the 00:01:38.040 --> 00:01:41.060 newspaper. A quarter of the entire American workforce 00:01:41.060 --> 00:01:43.939 is completely unemployed. Which is just staggering. 00:01:44.159 --> 00:01:46.700 It is. Manufacturing output has plummeted by 00:01:46.700 --> 00:01:49.620 a third. And worst of all, 40 % of all banks, 00:01:49.620 --> 00:01:52.640 we're talking over 9 ,000 individual banks across 00:01:52.640 --> 00:01:54.290 the country. across the country have just failed. 00:01:54.310 --> 00:01:57.329 Just completely vanished. Vanished. There is 00:01:57.329 --> 00:01:59.569 no unemployment insurance to fall back on. There 00:01:59.569 --> 00:02:02.810 is no social security and your life savings like 00:02:02.810 --> 00:02:05.989 the money you work decades for. It might literally 00:02:05.989 --> 00:02:09.009 be trapped behind the locked glass doors of an 00:02:09.009 --> 00:02:11.830 insolvent bank and you have no legal recourse 00:02:11.830 --> 00:02:15.009 to get it back. It is the absolute definition 00:02:15.009 --> 00:02:18.250 of a systemic heart attack. And the psychology 00:02:18.250 --> 00:02:22.150 driving that banking collapse is It's a self 00:02:22.150 --> 00:02:24.389 -fulfilling prophecy really how so well when 00:02:24.389 --> 00:02:25.990 people simply heard a rumor that their local 00:02:25.990 --> 00:02:27.949 bank might be in trouble They rushed to withdraw 00:02:27.949 --> 00:02:30.949 their funds, but you know banks don't keep everyone's 00:02:30.949 --> 00:02:33.030 money in a single vault Right, they lent it out. 00:02:33.370 --> 00:02:35.330 Exactly, they lent it out. So when everyone demands 00:02:35.330 --> 00:02:38.770 their cash at the exact same moment, that bank 00:02:38.770 --> 00:02:41.909 run actually causes the insolvency that the public 00:02:41.909 --> 00:02:44.110 was terrified of in the first place. OK, let's 00:02:44.110 --> 00:02:45.930 unpack this because we need to look at the mechanics 00:02:45.930 --> 00:02:48.490 of the first hundred days of the Roosevelt administration, 00:02:48.969 --> 00:02:52.409 which was essentially a massive triage operation. 00:02:52.469 --> 00:02:54.469 That's a great way to put it. Yeah, if the US 00:02:54.469 --> 00:02:57.150 economy is a patient bleeding out in an emergency 00:02:57.150 --> 00:03:00.030 room, you can't start prescribing a long -term 00:03:00.030 --> 00:03:03.189 diet and exercise plan. You have to slap a tourniquet 00:03:03.189 --> 00:03:05.430 on the wound. You have to stop the bleeding. 00:03:05.669 --> 00:03:07.430 And the speed of that tourniquet being applied 00:03:07.430 --> 00:03:09.930 was completely unprecedented in American history. 00:03:10.490 --> 00:03:13.050 Roosevelt takes office, and within 48 hours, 00:03:13.189 --> 00:03:15.729 he deters a bank holiday. Right. He essentially 00:03:15.729 --> 00:03:18.449 suspends all banking operations nationwide. Every 00:03:18.449 --> 00:03:20.849 single bank is ordered closed. Wow. And then 00:03:20.849 --> 00:03:23.610 he gets on the radio for his very first fireside 00:03:23.610 --> 00:03:26.229 chat and speaks directly to the American people. 00:03:26.409 --> 00:03:28.930 He tells them, hey, these banks will not be allowed 00:03:28.930 --> 00:03:31.169 to reopen their doors until federal reviewers 00:03:31.169 --> 00:03:33.810 have audited them and certified them as financially 00:03:33.810 --> 00:03:36.840 sound. And the crazy part is it actually works. 00:03:37.520 --> 00:03:40.000 Within days, three quarters of the banks in the 00:03:40.000 --> 00:03:42.080 Federal Reserve System are allowed to reopen. 00:03:42.659 --> 00:03:44.699 And instead of people rushing to pull their money 00:03:44.699 --> 00:03:48.319 out, billions of dollars in hoarded cash and 00:03:48.319 --> 00:03:51.099 gold flow back into the vaults. Because the trust 00:03:51.099 --> 00:03:53.539 was back. Exactly. But the administration didn't 00:03:53.539 --> 00:03:55.360 just unlock the doors and hope for the best, 00:03:55.759 --> 00:03:58.280 right? They fundamentally changed the structural 00:03:58.280 --> 00:04:00.939 rules of the game to ensure that trust was permanent. 00:04:01.580 --> 00:04:05.199 They created the FDIC, the Federal Deposit Insurance 00:04:05.199 --> 00:04:07.360 Corporation. Right, which insured individual 00:04:07.360 --> 00:04:11.800 bank deposits up to $2 ,500 at the time. Yeah. 00:04:12.300 --> 00:04:15.240 And they also passed the Glass -Steagall Act. 00:04:15.439 --> 00:04:17.860 Now, what's fascinating here is the mechanism 00:04:17.860 --> 00:04:20.500 behind Glass -Steagall. It wasn't just a regulatory 00:04:20.500 --> 00:04:24.160 slap on the wrist. It built a massive legal firewall 00:04:24.160 --> 00:04:26.740 between commercial banking and investment banking. 00:04:27.180 --> 00:04:29.000 Break that down for us. What does that firewall 00:04:29.000 --> 00:04:31.680 actually do in practice? Well, before Glass -Steagall, 00:04:31.779 --> 00:04:34.019 if you deposited your weekly paycheck into your 00:04:34.019 --> 00:04:36.259 local checking account, that bank could take 00:04:36.259 --> 00:04:38.899 your life savings and go gamble it on risky stock 00:04:38.899 --> 00:04:41.220 market speculation. Which seems insane today. 00:04:41.360 --> 00:04:43.420 Right. And if their bets went bad, your money 00:04:43.420 --> 00:04:46.000 evaporated. So Glass -Steagall effectively said, 00:04:46.060 --> 00:04:48.180 look, if you take everyday deposits from average 00:04:48.180 --> 00:04:50.680 citizens, you cannot play Wall Street casino 00:04:50.680 --> 00:04:53.240 games with that money. You have to be a boring, 00:04:53.579 --> 00:04:55.899 stable commercial bank. If you want to be an 00:04:55.899 --> 00:04:59.160 investment bank, and take massive risks, you 00:04:59.160 --> 00:05:01.480 absolutely cannot use everyday checking accounts 00:05:01.480 --> 00:05:04.399 to fund it. That structural change is huge. And, 00:05:04.439 --> 00:05:05.959 you know, I was looking through the source material, 00:05:06.040 --> 00:05:08.160 and there's this brilliant contrast with Canada 00:05:08.160 --> 00:05:11.220 that completely recontextualizes the banking 00:05:11.220 --> 00:05:13.519 crisis for me. Oh, yeah, the Canadian system. 00:05:13.639 --> 00:05:15.860 Yeah, yeah. Because if this depression was a 00:05:15.860 --> 00:05:19.040 global catastrophe, why didn't this massive wave 00:05:19.040 --> 00:05:22.569 of 9 ,000 bank failures happen? Everywhere. Canada's 00:05:22.569 --> 00:05:25.050 right next door. And they didn't have a single 00:05:25.050 --> 00:05:27.569 bank failure during this entire period. Not one. 00:05:27.730 --> 00:05:30.310 It's amazing. But the Canadian miracle wasn't 00:05:30.310 --> 00:05:32.990 magic. It was structural architecture. Canada 00:05:32.990 --> 00:05:35.310 utilized a branch banking model that stretched 00:05:35.310 --> 00:05:38.350 across provincial lines. OK. So a single bank 00:05:38.350 --> 00:05:40.550 might have a branch in an agricultural town in 00:05:40.550 --> 00:05:43.110 Alberta and another branch in a manufacturing 00:05:43.110 --> 00:05:46.410 hub in Ontario. That gave them incredible geographic 00:05:46.410 --> 00:05:49.269 and financial diversity. If a crop failed in 00:05:49.269 --> 00:05:51.470 one province, the bank's other branches could 00:05:51.470 --> 00:05:53.930 absorb the shock. While the United States relied 00:05:53.930 --> 00:05:57.410 on this hyper fragmented system of tiny independent 00:05:57.410 --> 00:06:00.139 local banks, banks. So if the local factory closed 00:06:00.139 --> 00:06:03.060 or the local crop failed, that local bank had 00:06:03.060 --> 00:06:06.480 no buffer. It just died. Exactly. And when those 00:06:06.480 --> 00:06:08.980 thousands of local banks died, they took the 00:06:08.980 --> 00:06:11.920 money supply down with them. The economist Milton 00:06:11.920 --> 00:06:14.000 Friedman pointed out that this wasn't just about 00:06:14.000 --> 00:06:17.120 people losing their savings. It was a macroeconomic 00:06:17.120 --> 00:06:20.639 disaster. Right. When banks fail, credit vanishes. 00:06:20.879 --> 00:06:23.160 When credit vanishes the entire money supply 00:06:23.160 --> 00:06:25.819 of the country shrinks drastically and when there 00:06:25.819 --> 00:06:27.740 are fewer dollars circulating in the economy 00:06:27.740 --> 00:06:30.500 the price of everything drops. Which brings us 00:06:30.500 --> 00:06:32.439 to the true monster of the Great Depression, 00:06:32.860 --> 00:06:35.639 the deflationary death spiral. Yes. And we hear 00:06:35.639 --> 00:06:37.879 that term deflation thrown around. And on the 00:06:37.879 --> 00:06:40.319 surface, falling prices sound great. Like if 00:06:40.319 --> 00:06:42.540 I'm broke, cheaper groceries sound like a win. 00:06:42.879 --> 00:06:45.180 Why is a deflationary spiral a death sentence 00:06:45.180 --> 00:06:47.120 for an economy? OK, let's walk through the math 00:06:47.120 --> 00:06:49.480 on a micro level. Imagine you're a wheat farmer 00:06:49.480 --> 00:06:53.060 in 1929. OK, I'm a farmer. You owe the bank $1 00:06:53.060 --> 00:06:56.120 ,000 for your tractor. At the time, you sell 00:06:56.120 --> 00:06:59.060 your wheat for $1 a bushel. So you need to grow 00:06:59.060 --> 00:07:01.220 and sell 1 ,000 bushels of wheat to pay off your 00:07:01.220 --> 00:07:04.060 debt. Simple enough. Sounds doable. But then 00:07:04.060 --> 00:07:06.339 the depression hits, the money supply shrinks, 00:07:06.660 --> 00:07:09.680 and massive deflation takes hold. By 1932, the 00:07:09.680 --> 00:07:12.439 price of wheat drops to 10 cents a bushel. Oh, 00:07:12.439 --> 00:07:15.519 wow. So suddenly, to pay off that exact same 00:07:15.519 --> 00:07:18.339 $1 ,000 debt, you don't need 1 ,000 bushels, 00:07:18.360 --> 00:07:21.500 you need 10 ,000 bushels. Exactly. Your debt 00:07:21.500 --> 00:07:24.350 has effectively multiplied by 10. without you 00:07:24.350 --> 00:07:26.970 borrowing a single extra dime. That is brutal. 00:07:27.129 --> 00:07:29.629 It becomes mathematically impossible to pay back. 00:07:29.870 --> 00:07:32.189 So you default. The bank seizes your farm, but 00:07:32.189 --> 00:07:34.509 the farm is worthless now, so the bank goes bankrupt. 00:07:35.269 --> 00:07:37.629 Multiply that by millions of citizens and businesses, 00:07:37.870 --> 00:07:40.550 and you have a completely frozen economy. Which 00:07:40.550 --> 00:07:43.610 perfectly explains the next major triage move, 00:07:43.769 --> 00:07:46.350 taking the US off the gold standard. Because 00:07:46.350 --> 00:07:49.050 as long as the US dollar was rigidly tied to 00:07:49.050 --> 00:07:51.699 a specific amount of physical gold, The central 00:07:51.699 --> 00:07:53.759 bank was wearing a straight jacket. They couldn't 00:07:53.759 --> 00:07:56.120 just print more money or aggressively lower interest 00:07:56.120 --> 00:07:58.519 rates to fight that deflation. Because if they 00:07:58.519 --> 00:08:02.259 did, investors would panic. They'd demand their 00:08:02.259 --> 00:08:05.019 dollars be converted to gold and ship that gold 00:08:05.019 --> 00:08:07.839 overseas. It would drain the country's reserves 00:08:07.839 --> 00:08:11.000 entirely. So suspending the gold standard allowed 00:08:11.000 --> 00:08:13.800 the dollar to float freely. The Federal Reserve 00:08:13.800 --> 00:08:16.980 could finally expand the money supply. By printing 00:08:16.980 --> 00:08:19.360 money, they were intentionally trying to cause 00:08:19.360 --> 00:08:22.279 inflation to break that death spiral and allow 00:08:22.279 --> 00:08:24.879 people to actually pay off their crushing debts. 00:08:25.120 --> 00:08:27.240 And that gets us through the financial triage. 00:08:27.379 --> 00:08:29.819 Right. So the bleeding is finally stopped. The 00:08:29.819 --> 00:08:32.259 banks are stabilized. The currency is decoupled 00:08:32.259 --> 00:08:35.519 from gold and the administration pivots. They 00:08:35.519 --> 00:08:37.740 move from the financial emergency room to the 00:08:37.740 --> 00:08:40.440 physical breathing economy, agriculture, and 00:08:40.440 --> 00:08:43.080 industry. This is the era of the first New Deal. 00:08:43.460 --> 00:08:46.159 The alphabet soup of new government agencies, 00:08:47.000 --> 00:08:50.580 primarily the AAA. the Agricultural Adjustment 00:08:50.580 --> 00:08:53.220 Administration, and the NRA, the National Recovery 00:08:53.220 --> 00:08:56.120 Administration. And this brings us right back 00:08:56.120 --> 00:08:58.860 to the hook of our deep dive, the slaughtering 00:08:58.860 --> 00:09:01.039 of the pigs. Yeah, it remains one of the most 00:09:01.039 --> 00:09:03.759 controversial and widely misunderstood economic 00:09:03.759 --> 00:09:05.840 interventions in history. Because it just feels 00:09:05.840 --> 00:09:09.100 so wrong. You have massive bread lines in cities 00:09:09.100 --> 00:09:11.980 like Chicago and New York. People are starving. 00:09:12.159 --> 00:09:14.639 And the government's grand solution is to pay 00:09:14.639 --> 00:09:17.120 farmers to destroy millions of acres of cotton 00:09:17.120 --> 00:09:19.580 and slaughter millions of piglets leaving the 00:09:19.580 --> 00:09:22.500 meat to rot in ditches. Like how does destroying 00:09:22.500 --> 00:09:25.320 the food supply help a starving nation? It comes 00:09:25.320 --> 00:09:27.379 back to a concept the administration called parity. 00:09:28.120 --> 00:09:30.100 The goal was to restore the purchasing power 00:09:30.100 --> 00:09:32.379 of agricultural commodities to the golden years 00:09:32.379 --> 00:09:34.620 right before World War I. You really have to 00:09:34.620 --> 00:09:36.500 look at what happened in the 1920s. Okay what 00:09:36.500 --> 00:09:38.679 happened? Rapid mechanization. The widespread 00:09:38.679 --> 00:09:41.159 adoption of gas powered tractors, better chemical 00:09:41.159 --> 00:09:43.799 fertilizers. It meant American farmers became 00:09:43.799 --> 00:09:45.799 wildly efficient. They were producing mountains 00:09:45.799 --> 00:09:47.779 of food. So they basically became victims of 00:09:47.779 --> 00:09:50.200 their own success. Exactly. They flooded the 00:09:50.200 --> 00:09:53.340 market. That massive oversupply crashed agricultural 00:09:53.340 --> 00:09:56.340 prices well before the stocks market even crashed 00:09:56.340 --> 00:10:01.820 in 1929. By 1933, prices were so insanely low 00:10:01.820 --> 00:10:04.460 that harvesting a crop actually cost the farmer 00:10:04.460 --> 00:10:06.740 more money than the crop was worth on the open 00:10:06.740 --> 00:10:09.879 market. That is just mind -blowing. Wheat was 00:10:09.879 --> 00:10:12.600 literally left to rot in the fields of Montana. 00:10:13.120 --> 00:10:15.080 Sheep were slaughtered in Oregon and thrown into 00:10:15.080 --> 00:10:17.539 canyons just to save on the cost of transporting 00:10:17.539 --> 00:10:19.899 them to market. So the government realizes that 00:10:19.899 --> 00:10:22.279 if the rural economy dies, the farmers can't 00:10:22.279 --> 00:10:24.460 buy manufactured goods from the cities and the 00:10:24.460 --> 00:10:26.639 factory workers lose their jobs anyway. Right. 00:10:26.919 --> 00:10:29.659 The AAA steps in and creates artificial scarcity 00:10:29.659 --> 00:10:32.779 by literally paying farmers to not grow crops 00:10:32.779 --> 00:10:35.720 or to destroy existing livestock. They severely 00:10:35.720 --> 00:10:39.000 reduce the total output. And that forced market 00:10:39.000 --> 00:10:41.480 prices to rise back to a survival level for the 00:10:41.480 --> 00:10:44.220 farmers. It was a brutal mathematical calculation. 00:10:44.539 --> 00:10:47.440 But by 1937, it had rapidly doubled the average 00:10:47.440 --> 00:10:49.610 income of landowning farmers. OK, so that's agriculture. 00:10:49.669 --> 00:10:52.590 What about industry? Well, they attempted a similar, 00:10:52.889 --> 00:10:55.529 heavily managed approach for industry with the 00:10:55.529 --> 00:10:58.809 NRA, the National Recovery Administration. The 00:10:58.809 --> 00:11:00.610 government essentially encouraged industries 00:11:00.610 --> 00:11:02.990 to get together and create cartels. The Blue 00:11:02.990 --> 00:11:06.230 Eagle campaign, right? Yes. Businesses that complied 00:11:06.230 --> 00:11:08.889 got to display a Blue Eagle poster in their window. 00:11:09.669 --> 00:11:12.269 It established minimum wages. It finally abolished 00:11:12.269 --> 00:11:14.929 child labor, which was huge, but it also set 00:11:14.929 --> 00:11:17.639 mandatory price floors. They made it a federal 00:11:17.639 --> 00:11:20.120 crime for a business to lower its prices past 00:11:20.120 --> 00:11:22.080 a certain point. Wait, hold on. This is where 00:11:22.080 --> 00:11:24.580 the logic gets really twisted for me. If millions 00:11:24.580 --> 00:11:27.340 of people are unemployed and completely broke... 00:11:27.159 --> 00:11:30.240 How does making goods legally more expensive 00:11:30.240 --> 00:11:32.779 help them? Wouldn't a price floor just price 00:11:32.779 --> 00:11:35.120 starving people out of the market entirely? That 00:11:35.120 --> 00:11:37.600 is exactly the criticism many economists level 00:11:37.600 --> 00:11:40.039 at the NRA. But the administration's logic was 00:11:40.039 --> 00:11:42.399 focused on the producers, not just the consumers. 00:11:43.000 --> 00:11:45.299 They believed that cutthroat competition was 00:11:45.299 --> 00:11:48.379 forcing businesses to slash prices just to survive. 00:11:48.590 --> 00:11:51.429 And to afford those slash prices, the businesses 00:11:51.429 --> 00:11:54.970 had to slash wages or fire workers. That destroyed 00:11:54.970 --> 00:11:57.629 consumer demand, leading to more price cuts and 00:11:57.629 --> 00:12:00.799 more wage cuts. The NRA price floors were an 00:12:00.799 --> 00:12:03.879 attempt to put a hard floor under wages. If businesses 00:12:03.879 --> 00:12:06.539 couldn't undercut each other on price, they wouldn't 00:12:06.539 --> 00:12:08.620 need to slash their workers' pay to compete. 00:12:08.820 --> 00:12:11.279 It's an incredible level of micromanagement, 00:12:11.399 --> 00:12:13.539 though. I mean, the government is suddenly dictating 00:12:13.539 --> 00:12:15.600 the price of a chicken in a local butcher shop 00:12:15.600 --> 00:12:18.179 or how many hours a tailor can work. Yeah, it'll 00:12:18.179 --> 00:12:20.080 lie. And while the administration thought this 00:12:20.080 --> 00:12:22.299 was necessary, the Supreme Court took a look 00:12:22.299 --> 00:12:24.860 at this unprecedented federal overreach and just 00:12:24.860 --> 00:12:27.440 brought the hammer down. They did. The Supreme 00:12:27.440 --> 00:12:29.870 Court unanimously struck down both the original 00:12:29.870 --> 00:12:33.090 AAA and the NRA. They rule that the federal government 00:12:33.090 --> 00:12:35.769 absolutely does not have the constitutional authority 00:12:35.769 --> 00:12:39.330 to dictate local agricultural production quotas 00:12:39.330 --> 00:12:42.029 or enforce granular industrial trade codes on 00:12:42.029 --> 00:12:44.049 local businesses. Okay, so here's where it gets 00:12:44.049 --> 00:12:47.330 really interesting. Because FDR is now completely 00:12:47.330 --> 00:12:50.139 cornered. The Supreme Court just demolished his 00:12:50.139 --> 00:12:52.899 primary emergency tools. And despite all the 00:12:52.899 --> 00:12:56.659 bank fixes and the farm subsidies, by 1935, unemployment 00:12:56.659 --> 00:12:59.740 is still hovering over 20%. The temporary bandages 00:12:59.740 --> 00:13:02.139 aren't working. Right. And they aren't surviving 00:13:02.139 --> 00:13:04.899 legal challenges. He realizes he needs something 00:13:04.899 --> 00:13:07.399 permanent, something constitutional, and something 00:13:07.399 --> 00:13:09.940 bulletproof, which leads us directly into the 00:13:09.940 --> 00:13:12.080 second new deal. This is the critical pivot. 00:13:12.399 --> 00:13:14.759 The Roosevelt administration shifts from treating 00:13:14.759 --> 00:13:16.740 the Depression as a temporary emergency that 00:13:16.740 --> 00:13:19.480 needs triage to viewing the American economy 00:13:19.480 --> 00:13:22.919 as structurally flawed. They decide it requires 00:13:22.919 --> 00:13:26.039 a permanent, institutionalized government safety 00:13:26.039 --> 00:13:28.740 net. And the absolute crown jewel of this pivot 00:13:28.740 --> 00:13:32.179 is the Social Security Act of 1935. It established 00:13:32.179 --> 00:13:34.679 universal retirement pensions, unemployment insurance, 00:13:34.899 --> 00:13:36.860 and welfare benefits for the handicapped and 00:13:36.860 --> 00:13:39.600 needy children. And the way FDR structured the 00:13:39.600 --> 00:13:42.399 funding is honestly a lesson in political immortality. 00:13:42.700 --> 00:13:45.419 It really is. He completely refused to fund it 00:13:45.419 --> 00:13:48.179 out of general tax revenue. He insisted it be 00:13:48.179 --> 00:13:51.059 funded by a specific payroll tax taken straight 00:13:51.059 --> 00:13:53.720 out of a worker's paycheck matched by the employer. 00:13:54.019 --> 00:13:56.480 Right. When you look at your pay stub today and 00:13:56.480 --> 00:13:58.700 see that FICA deduction taking a bite out of 00:13:58.700 --> 00:14:01.559 your check, you're looking at the direct fingerprint 00:14:01.559 --> 00:14:05.759 of FDR's 1935 strategy. There's an incredible 00:14:05.759 --> 00:14:08.519 quote from the sources where FDR explains exactly 00:14:08.519 --> 00:14:11.179 why he did it that way. He said, we put those 00:14:11.179 --> 00:14:13.500 payroll contributions there so as to give the 00:14:13.500 --> 00:14:16.299 contributors a legal, moral, and political right 00:14:16.299 --> 00:14:19.100 to collect their pensions. With those taxes in 00:14:19.100 --> 00:14:21.919 there, no damn politician can ever scrap my social 00:14:21.919 --> 00:14:24.659 security program. It was brilliant. By tying 00:14:24.659 --> 00:14:27.460 it directly to individual visible contributions, 00:14:27.899 --> 00:14:30.779 he transformed it. It wasn't a government handout 00:14:30.779 --> 00:14:33.200 that could be cut during a budget crisis. It 00:14:33.200 --> 00:14:35.600 was an earned right that the citizen had paid 00:14:35.600 --> 00:14:38.299 for. Alongside Social Security, we get the massive 00:14:38.299 --> 00:14:41.139 structural jobs programs, most notably the WPA, 00:14:41.320 --> 00:14:43.240 the Works Progress Administration. And this wasn't 00:14:43.240 --> 00:14:45.080 just handing out checks. They eventually employed 00:14:45.080 --> 00:14:47.139 over eight and a half million people. Yeah. And 00:14:47.139 --> 00:14:48.720 we aren't just talking about digging ditches 00:14:48.720 --> 00:14:51.940 here. Right. They built the infrastructure of 00:14:51.940 --> 00:14:54.820 modern America. The Lincoln Tunnel, LaGuardia 00:14:54.820 --> 00:14:58.000 Airport, thousands of hospitals, schools and 00:14:58.000 --> 00:15:00.679 bridges. But the part that fascinates me the 00:15:00.679 --> 00:15:04.159 most is the arts funding. Oh, the Federal Theater 00:15:04.159 --> 00:15:06.120 Project, the Federal Writers Project, the Federal 00:15:06.120 --> 00:15:08.480 Art Project. Yeah. The administration operated 00:15:08.480 --> 00:15:11.799 on the premise that an unemployed artist, a musician 00:15:11.799 --> 00:15:15.100 or a historian had just as much right to work 00:15:15.100 --> 00:15:19.000 and eat as an unemployed brook layer. They hired 00:15:19.000 --> 00:15:21.480 thousands of writers. I mean, they hired Zora 00:15:21.480 --> 00:15:23.860 Neale Hurston to travel the South, recording 00:15:23.860 --> 00:15:26.360 vanishing folklore and conducting oral history 00:15:26.360 --> 00:15:29.500 interviews with former slaves. They created incredible 00:15:29.500 --> 00:15:31.700 state guidebooks. It is a massive cultural undertaking. 00:15:31.840 --> 00:15:34.559 But as we marvel at the sheer scale of this new 00:15:34.559 --> 00:15:37.120 safety net, our sources require us to look very 00:15:37.120 --> 00:15:39.679 critically at who it caught and who was intentionally 00:15:39.679 --> 00:15:42.059 allowed to fall through the holes. Yeah, the 00:15:42.059 --> 00:15:44.120 realities of discrimination baked into the New 00:15:44.120 --> 00:15:48.340 Deal are stark and undeniable. While programs 00:15:48.340 --> 00:15:51.960 like the WPA did hire Black Americans, they largely 00:15:51.960 --> 00:15:54.960 operated in strictly segregated units, often 00:15:54.960 --> 00:15:57.000 assigned to the most grueling physical labor. 00:15:57.139 --> 00:15:59.200 And the discrimination goes much deeper into 00:15:59.200 --> 00:16:01.240 the actual economic legislation we discussed 00:16:01.240 --> 00:16:03.919 earlier. Take the NRA, which established those 00:16:03.919 --> 00:16:06.639 federal minimum wages. It was heavily criticized 00:16:06.639 --> 00:16:09.419 by Black leaders at the time. In fact, many in 00:16:09.419 --> 00:16:11.860 the Black press dubbed it the Negro Removal Act. 00:16:12.009 --> 00:16:14.409 because the unintended consequence of implementing 00:16:14.409 --> 00:16:17.450 a strict federal minimum wage in a deeply prejudiced 00:16:17.450 --> 00:16:20.700 society was devastating. Many white employers 00:16:20.700 --> 00:16:23.980 simply refused to pay black workers the new higher 00:16:23.980 --> 00:16:26.860 federal wage. Rather than pay them equally, they 00:16:26.860 --> 00:16:28.799 fired them and hired white workers to take their 00:16:28.799 --> 00:16:30.580 place. And then there is the housing sector, 00:16:30.799 --> 00:16:33.259 which carries perhaps the most toxic lasting 00:16:33.259 --> 00:16:35.899 legacy of the entire era. The New Deal created 00:16:35.899 --> 00:16:38.720 the Homeowners Loan Corporation, the HOLC, and 00:16:38.720 --> 00:16:40.600 the Federal Housing Administration, the FHA. 00:16:40.960 --> 00:16:43.360 These were designed to back mortgages, offer 00:16:43.360 --> 00:16:45.860 lower interest rates, and save millions of homes 00:16:45.860 --> 00:16:49.340 from foreclosure. But in doing so, they institutionalized 00:16:49.340 --> 00:16:52.500 a practice that defined American geography, redlining. 00:16:52.720 --> 00:16:54.960 If we connect this to the bigger picture, we 00:16:54.960 --> 00:16:57.820 see the exact mechanism of how generational wealth 00:16:57.820 --> 00:17:00.860 was restricted. The HOLC didn't just hand out 00:17:00.860 --> 00:17:04.079 loans blindly. They dispatched appraisers to 00:17:04.079 --> 00:17:07.200 meticulously map out major American cities, grading 00:17:07.200 --> 00:17:09.460 neighborhoods on their perceived financial risk. 00:17:09.960 --> 00:17:12.559 And the determining factor for a high -risk neighborhood 00:17:12.559 --> 00:17:15.960 was explicitly racial. The sources detail how 00:17:15.960 --> 00:17:18.319 any neighborhood with what the government termed 00:17:18.319 --> 00:17:20.819 inharmonious racial groups, which primarily meant 00:17:20.819 --> 00:17:22.880 black residents, but also applied to certain 00:17:22.880 --> 00:17:25.240 immigrant populations, was outlined on these 00:17:25.240 --> 00:17:28.460 maps in red ink, marking it as a hazardous area 00:17:28.460 --> 00:17:30.700 for investment. This wasn't some secret bias. 00:17:30.859 --> 00:17:33.829 It was literal written policy. The FHA underwriting 00:17:33.829 --> 00:17:36.410 manual explicitly warned against the infiltration 00:17:36.410 --> 00:17:39.410 of incompatible racial groups. It meant that 00:17:39.410 --> 00:17:41.369 if you were a black American, regardless of your 00:17:41.369 --> 00:17:43.990 personal credit score or income, you were systematically 00:17:43.990 --> 00:17:46.710 denied access to these federally backed low interest 00:17:46.710 --> 00:17:48.849 mortgages. The government even required a real 00:17:48.849 --> 00:17:51.630 estate developers building new suburban projects 00:17:51.630 --> 00:17:55.309 to include racially restrictive covenants, legally 00:17:55.309 --> 00:17:58.250 binding clauses in the property deed that banned 00:17:58.250 --> 00:18:00.509 the future sale of the home to black buyers. 00:18:00.509 --> 00:18:03.200 If that developer wanted federal backing. It's 00:18:03.200 --> 00:18:05.720 awful. When you think about this, it's staggering. 00:18:06.220 --> 00:18:08.819 These 1930s maps didn't just exist in the history 00:18:08.819 --> 00:18:11.660 books of the Progression Era. They actively shaped 00:18:11.660 --> 00:18:14.099 the zoning, the school districts, the segregated 00:18:14.099 --> 00:18:17.000 geography, and the massive generational wealth 00:18:17.000 --> 00:18:19.740 gap of the modern cities you live in today. Exactly. 00:18:19.880 --> 00:18:22.720 Because for decades, homeownership was the primary 00:18:22.720 --> 00:18:25.180 engine for middle class wealth creation, and 00:18:25.180 --> 00:18:28.420 an entire demographic was locked out of the engine 00:18:28.420 --> 00:18:31.720 room by federal design. The New Deal undeniably 00:18:31.720 --> 00:18:34.200 rebuilt the American economy, but it built a 00:18:34.200 --> 00:18:37.259 new structure on top of the existing deeply flawed 00:18:37.259 --> 00:18:40.460 racial architecture of the 1930s. So what does 00:18:40.460 --> 00:18:43.180 this all mean? We've explored the banking triage, 00:18:43.339 --> 00:18:45.680 the agricultural paradoxes, the birth of Social 00:18:45.680 --> 00:18:48.039 Security and the deeply unequal application of 00:18:48.039 --> 00:18:50.880 these maps. It brings us to the ultimate million 00:18:50.880 --> 00:18:53.579 dollar historical and economic debate. Did the 00:18:53.579 --> 00:18:55.700 New Deal actually cure the Great Depression? 00:18:56.079 --> 00:18:58.799 Well, there is absolutely no consensus among 00:18:58.799 --> 00:19:01.420 economists on that question. Why? Oh, yeah. If 00:19:01.420 --> 00:19:03.259 we break down the competing schools of thought 00:19:03.259 --> 00:19:05.660 objectively, you generally see three distinct 00:19:05.660 --> 00:19:08.420 narratives. Think of the American economy in 00:19:08.420 --> 00:19:11.920 1933 as a car that is completely stalled out 00:19:11.920 --> 00:19:14.819 on the highway. OK, stalled car. Got it. First, 00:19:15.039 --> 00:19:17.920 you have the Keynesian economists. Their view 00:19:17.920 --> 00:19:20.619 is that the car simply ran out of gas. Private 00:19:20.619 --> 00:19:22.460 demand had collapsed, so the government needed 00:19:22.460 --> 00:19:25.440 to step in and fill the tank with massive deficit 00:19:25.440 --> 00:19:28.420 spending. They argue the New Deal successfully 00:19:28.420 --> 00:19:30.960 halted the freefall and eased the suffering. 00:19:31.220 --> 00:19:34.680 But? But, ironically, they believe SDR was far 00:19:34.680 --> 00:19:37.319 too fiscally conservative. Oh, interesting. Yeah, 00:19:37.519 --> 00:19:40.200 he hated deficits. Keynesians argue he never 00:19:40.200 --> 00:19:42.519 pumped enough gas into the tank to actually restart 00:19:42.519 --> 00:19:45.369 the engine. From their perspective, it took the 00:19:45.369 --> 00:19:47.829 massive, unavoidable deficit spending of World 00:19:47.829 --> 00:19:50.730 War II, building thousands of tanks and planes, 00:19:50.950 --> 00:19:53.450 what they call military Keynesianism, to finally 00:19:53.450 --> 00:19:55.849 achieve full employment. OK, so the Keynesians 00:19:55.849 --> 00:19:58.630 say the New Deal is the right idea, but FDR didn't 00:19:58.630 --> 00:20:01.289 press the pedal hard enough. What about the second 00:20:01.289 --> 00:20:03.609 view? The second view comes from the monetarists, 00:20:03.970 --> 00:20:05.970 most famously championed by Milton Friedman. 00:20:06.160 --> 00:20:09.000 They look at the stalled car and argue that the 00:20:09.000 --> 00:20:11.380 Federal Reserve actually broke the steering wheel 00:20:11.380 --> 00:20:14.019 in the late 1920s by letting the money supply 00:20:14.019 --> 00:20:16.339 shrink in the first place. Right, the deflation 00:20:16.339 --> 00:20:18.900 we talked about. Exactly. For the monetarists, 00:20:19.079 --> 00:20:21.759 the New Deal's banking reforms creating the FDIC, 00:20:22.160 --> 00:20:25.099 dropping the gold standard, were brilliant and 00:20:25.099 --> 00:20:27.400 entirely sufficient to fix the steering wheel. 00:20:28.099 --> 00:20:30.920 But they argue that the heavy -handed micromanagement, 00:20:31.440 --> 00:20:33.779 specifically the NRA's price floors and industry 00:20:33.779 --> 00:20:36.619 cartels, acted like someone repeatedly yanking 00:20:36.619 --> 00:20:38.980 the emergency brake. Oh, wow. They believe the 00:20:38.980 --> 00:20:40.880 market would have naturally recovered much faster 00:20:40.880 --> 00:20:43.079 if the government hadn't stifled business growth 00:20:43.079 --> 00:20:45.859 with those regulations. So Keynesians say pump 00:20:45.859 --> 00:20:48.660 more gas, monetarists say fix the bank and take 00:20:48.660 --> 00:20:50.980 off the emergency brake. What's the third perspective? 00:20:51.460 --> 00:20:54.000 The third is the new Keynesian, or expectations 00:20:54.000 --> 00:20:57.440 theory. This argues that the recovery was almost 00:20:57.440 --> 00:21:01.200 entirely psychological. When Roosevelt took office 00:21:01.200 --> 00:21:03.720 and implemented these immediate radical regime 00:21:03.720 --> 00:21:06.019 changes closing the banks, speaking directly 00:21:06.019 --> 00:21:09.180 to the public, he instantly shifted the psychology 00:21:09.180 --> 00:21:12.119 of the driver. The mindset of the public. Exactly. 00:21:12.700 --> 00:21:15.160 For years, people expected prices to keep falling, 00:21:15.319 --> 00:21:18.720 so they hoarded their money in fear. Overnight, 00:21:19.000 --> 00:21:20.660 Roosevelt convinced the public that the government 00:21:20.660 --> 00:21:23.309 was going to force prices up. Believing that 00:21:23.309 --> 00:21:25.390 inflation was coming, people stopped hoarding 00:21:25.390 --> 00:21:27.009 and started buying goods before they got more 00:21:27.009 --> 00:21:30.309 expensive. It stimulated demand instantly. It 00:21:30.309 --> 00:21:32.990 was a master class in manipulating public expectations 00:21:32.990 --> 00:21:35.650 to change economic reality. It's fascinating 00:21:35.650 --> 00:21:38.950 how the exact same historical data set can be 00:21:38.950 --> 00:21:41.250 interpreted so differently by brilliant economic 00:21:41.250 --> 00:21:44.319 minds. But it's crucial to remember that the 00:21:44.319 --> 00:21:46.839 debate at the time wasn't just academic economics. 00:21:47.319 --> 00:21:50.799 It was a massive, vicious, political, Rorschach 00:21:50.799 --> 00:21:52.920 test. Oh, absolutely. And it's important to note 00:21:52.920 --> 00:21:55.119 for you listening, we are merely reporting the 00:21:55.119 --> 00:21:57.119 historical reactions found in the sources here. 00:21:57.480 --> 00:21:59.680 We aren't endorsing any of these political views. 00:22:00.079 --> 00:22:02.240 Yeah, the vitriol was intense. From the political 00:22:02.240 --> 00:22:04.660 gore. Right, there were loud claims that the 00:22:04.660 --> 00:22:07.940 New Deal was tantamount to fascism. Critics pointed 00:22:07.940 --> 00:22:10.019 to the NRA's strict economic controls and the 00:22:10.019 --> 00:22:12.680 Blue Eagle campaign, and they saw incredibly 00:22:12.680 --> 00:22:15.539 uncomfortable parallels to the state -directed 00:22:15.539 --> 00:22:19.000 command economies of Mussolini's Italy or Hitler's 00:22:19.000 --> 00:22:22.200 Germany. There were also widespread, fervent 00:22:22.200 --> 00:22:25.480 accusations of communism. Figures like Elizabeth 00:22:25.480 --> 00:22:27.799 Dilling published fiery propaganda about the 00:22:27.799 --> 00:22:30.480 Roosevelt Red Record, stoking national fears 00:22:30.480 --> 00:22:32.440 that the federal government was actively being 00:22:32.440 --> 00:22:35.400 infiltrated by Soviet agents aiming to destroy 00:22:35.400 --> 00:22:37.799 American capitalism. And the criticism from the 00:22:37.799 --> 00:22:40.000 political left was just as fierce, but for the 00:22:40.000 --> 00:22:43.539 exact opposite reasons. New left historians and 00:22:43.539 --> 00:22:45.579 contemporary radical critics argued that the 00:22:45.579 --> 00:22:48.380 New Deal wasn't revolutionary at all. They argued 00:22:48.380 --> 00:22:51.660 it acted as a mere band -aid, a calculated pacification 00:22:51.660 --> 00:22:53.839 strategy designed specifically to preserve the 00:22:53.839 --> 00:22:56.059 most exploitative elements of capitalism. Right, 00:22:56.160 --> 00:22:59.299 to keep the system intact. Exactly. They criticize 00:22:59.299 --> 00:23:01.539 Roosevelt for doing far too little to challenge 00:23:01.539 --> 00:23:04.660 the power of massive corporations, for refusing 00:23:04.660 --> 00:23:07.900 to nationalize the banks entirely, and for actively 00:23:07.900 --> 00:23:10.220 ignoring the plight of sharecroppers, women and 00:23:10.220 --> 00:23:12.500 minorities, just to keep Southern Democrats in 00:23:12.500 --> 00:23:14.859 his voting coalition. Roosevelt was walking a 00:23:14.859 --> 00:23:17.400 nearly impossible tightrope. He was trying to 00:23:17.400 --> 00:23:19.480 cobble together enough reforms to save liberal 00:23:19.480 --> 00:23:22.119 democracy and the capitalist system in a global 00:23:22.119 --> 00:23:25.079 era where many other traumatized nations were 00:23:25.079 --> 00:23:27.980 entirely abandoning democracy and falling to 00:23:27.980 --> 00:23:30.019 extreme dictatorships on both the left and the 00:23:30.019 --> 00:23:32.519 right. It really was one of the most precarious 00:23:32.519 --> 00:23:34.980 moments in human history. To wrap all of this 00:23:34.980 --> 00:23:37.079 up, regardless of whether you side with the Keynesians 00:23:37.079 --> 00:23:39.460 or the monetarists and regardless of the fierce 00:23:39.460 --> 00:23:42.259 political mudslinging of the era, there is one 00:23:42.259 --> 00:23:47.080 undeniable structural fact. The New Deal. profoundly, 00:23:47.080 --> 00:23:49.740 permanently transformed the power and purpose 00:23:49.740 --> 00:23:51.700 of the federal government in the United States. 00:23:52.200 --> 00:23:54.359 It took a nation with a strictly laissez faire 00:23:54.359 --> 00:23:57.539 mentality, a country where your poverty or your 00:23:57.539 --> 00:24:00.039 unemployment was viewed as your own personal 00:24:00.240 --> 00:24:03.259 moral failure, or at best a problem for your 00:24:03.259 --> 00:24:05.660 global church charity. And it shifted it into 00:24:05.660 --> 00:24:08.059 a modern reality where the national government 00:24:08.059 --> 00:24:10.819 takes active legal responsibility for the basic 00:24:10.819 --> 00:24:13.980 economic security of its citizens. It completely 00:24:13.980 --> 00:24:16.940 rewrote the American social contract. But there 00:24:16.940 --> 00:24:19.079 is one final provocative thought from the source 00:24:19.079 --> 00:24:21.079 material that I want to leave you with, and it 00:24:21.079 --> 00:24:23.140 has to do with federalism. OK, let's hear it. 00:24:23.279 --> 00:24:25.259 We spent this entire deep dive talking about 00:24:25.259 --> 00:24:28.079 the massive, unprecedented expansion of federal 00:24:28.079 --> 00:24:32.119 power during the 1930s. But that expansion deeply 00:24:32.119 --> 00:24:34.579 aggravated state governments, who suddenly felt 00:24:34.579 --> 00:24:36.799 like middle management. Right, because suddenly 00:24:36.799 --> 00:24:39.180 politicians in Washington are dictating exactly 00:24:39.180 --> 00:24:41.519 how relief money is supposed to be spent in local 00:24:41.519 --> 00:24:44.299 backyards across the country. Exactly. And the 00:24:44.299 --> 00:24:46.819 states didn't just roll over and accept it. Some 00:24:46.819 --> 00:24:49.160 engaged in what historians specifically call 00:24:49.160 --> 00:24:52.369 administrative sabotage. Administrative sabotage. 00:24:52.569 --> 00:24:55.650 Yeah, there's a glaring example from Ohio where 00:24:55.650 --> 00:24:58.930 the state governor mismanaged, delayed, and mishandled 00:24:58.930 --> 00:25:01.869 federal relief funds so egregiously that the 00:25:01.869 --> 00:25:03.990 Roosevelt administration eventually had to step 00:25:03.990 --> 00:25:06.789 in, legally strip the state of its authority, 00:25:07.369 --> 00:25:09.950 and completely federalize their local relief 00:25:09.950 --> 00:25:12.589 efforts. That is wild. The state was actively 00:25:12.589 --> 00:25:14.450 fighting the hand that was trying to feed its 00:25:14.450 --> 00:25:17.009 own starving citizens just to protect its political 00:25:17.009 --> 00:25:19.369 turf. It forces you to ponder a dynamic that 00:25:19.369 --> 00:25:21.970 is still incredibly relevant today. Whenever 00:25:21.970 --> 00:25:24.609 a massive new federal policy is announced, whether 00:25:24.609 --> 00:25:26.549 it's regarding health care, infrastructure, spending 00:25:26.549 --> 00:25:29.269 or education, the real battle isn't just fought 00:25:29.269 --> 00:25:31.289 in the halls of Congress in Washington, D .C. 00:25:31.390 --> 00:25:33.690 No, it's not. It's fought in the trenches of 00:25:33.690 --> 00:25:35.890 your local and state governments. It's in how 00:25:35.890 --> 00:25:38.569 your governor or your mayor chooses to implement, 00:25:38.569 --> 00:25:42.259 delay or quietly sabotage that federal mandate? 00:25:42.839 --> 00:25:45.059 It raises an important question for you to consider. 00:25:45.539 --> 00:25:47.420 How much of the government that you experience 00:25:47.420 --> 00:25:49.759 in your daily life is actually just this invisible 00:25:49.759 --> 00:25:53.039 ongoing tug of war between federal ambition and 00:25:53.039 --> 00:25:55.329 state resistance? That is a phenomenal point 00:25:55.329 --> 00:25:57.950 to end on. It brings us right back to that emergency 00:25:57.950 --> 00:26:00.890 room we started in. The federal doctors in 1933 00:26:00.890 --> 00:26:02.970 rushed in, they slapped on the tourniquet, and 00:26:02.970 --> 00:26:05.690 they forced the patient to swallow a completely 00:26:05.690 --> 00:26:08.349 new, highly experimental regimen of medicine. 00:26:08.849 --> 00:26:11.029 And while historians and economists will argue 00:26:11.029 --> 00:26:13.450 forever about which specific pill actually cured 00:26:13.450 --> 00:26:15.730 the disease, the reality is that the hospital 00:26:15.730 --> 00:26:18.230 itself, the very structure of the American system, 00:26:18.549 --> 00:26:20.930 was never, ever the same again. Thanks for taking 00:26:20.930 --> 00:26:21.950 this deep dive with us.